Digital transformation and strategy are so intertwined that the phrase “digital transformation strategy” borders on being redundant. But when the word “strategy” is joined to “digital,” it may not mean what you think it does.
To evolve your business from its current state into a thoroughly modernized, ultra-efficient version of itself requires a detailed game plan. At the same time, the nature of the game differs radically from the sport you may be used to playing.
For most business owners, the first step toward creating a successful digital transformation strategy is unlearning strategic planning practices they’re familiar with.
Have you ever tried to ride a backwards bicycle?
Engineer and science educator Destin Sandlin has. It took him eight months to unlearn the bike-riding skills he’d developed as a child and relearn the art of riding a specially built bicycle with reverse steering.
Learning how to plan strategically for digital transformation is like mastering Sandlin’s Backwards Brain Bike because it requires you to take a novel approach to a familiar activity. Fortunately, it takes a lot less time to unlearn traditional strategic planning than it does to unlearn steering a bike. The shift becomes simple as soon as you grasp the logic of what professors Rita Gunther McGrath and Ian MacMillan have called “discovery-driven planning.”
Planning through discovery, not dictation
McGrath and MacMillan first described discovery-driven planning way back in 1995. (Check out their HBR article for full details.) They presented their method as “a practical tool that acknowledges the difference between planning for a new venture and planning for a more conventional line of business.”
Like Sandlin’s Backwards Brain Bike, discovery-driven planning reverses the usual way of making forward motion happen.
Conventional strategic planning works from a solid “platform of past experience” and predicts the future from that. It assumes the future will simply repeat the past.
But planning a new company or initiative involves a much greater degree of uncertainty. Planning for innovation is inherently unpredictable and risky. It calls for a kind of planning that questions all assumptions. In fact, the goal of such a plan should not be to dictate the path of action but rather to deliberately vet assumptions and replace them with verifiable insights.
[Pull quote: “…discovery-driven planning systematically converts assumptions into knowledge as a strategic venture unfolds. When new data are uncovered, they are incorporated into the evolving plan. The real potential of the venture is discovered as it develops…
McGrath and MacMillan. (1995). Discovery-driven planning. Harvard Business Review.]
Engineering a digital transformation is like undertaking a new venture in that it takes you into unexplored territory. The smartest way to plan for an uncharted journey is to discover the chart as you go.
What you need to unlearn to develop a digital transformation strategy
Taking a discovery-driven approach to digital transformation means articulating a clear goal but staying open to different ways of getting there. It also means undertaking small pilot tests to see what works and what doesn’t, and keeping an eye out for quick wins you can leverage. Above all, it means operating in a mode of continual learning, evaluation, and re-strategizing.
Here are five practices from conventional, platform-based planning you must abandon before you can do digital transformation well:
- Creating a plan that’s etched in stone. Strategic planning is tough, expensive work. Many small and medium-sized businesses invest thousands of dollars to develop detailed, beautifully presented planning documents. Once that document has been created, the temptation is to view it as complete and static, as if it were a polished stone tablet.
A digital transformation strategy can never rest on the shelf. It’s a document that must live and breathe among the team. As initiatives unfold, generating new data, the plan must be frequently updated.
- Allocating a fixed budget. Many owners of SMBs confuse digital spending with IT spending. That’s like equating the cost of running a car with the costs of operating it. When you invest in digital strategies, you’re not just acquiring new technology; you’re revolutionizing the way you do business. That means you need a budget that, like your plan, can be flexible. It should be designed to allow for frequent check-ins so you can re-evaluate your budget assumptions and redistribute funds as needed.
That doesn’t mean the sky’s the limit for digital initiatives. A wise practice is to set a cap on the funds you’re willing to spend on a particular pilot project. Think of this as the cost you’re committing to learning, and factor the value of the knowledge gained into your ROI calculations.
- Overlying on historical data. The key to discovery-driven planning is collecting and analyzing data in real-time so you can continually generate new insights to support your strategy. One of the first steps in any digital transformation strategy should be to set up systems for gathering data and making sense of it. Yesterday’s data won’t necessarily guide you to tomorrow’s breakthroughs.
- Assuming your team will get behind the plan. Conventional strategic plans tend to be aspirational but not necessarily innovative. In most cases, they operate within existing paradigms and aim to build predictably on past successes. In contrast, a plan for digital transformation puts forward radical ideas. It introduces change with a capital C.
Consequently, team members used to nodding their way through the annual planning document may find themselves surprised and challenged. They may feel uncomfortable, even threatened, by the process of transforming familiar business processes. To gain their buy-in, you’ll want to think about not just what goes into your plan but also about how you’ll socialize the strategy and get people excited about it.
- Outsourcing the entire strategic planning process. Yes, creating a digital transformation strategy takes expertise and time. And for these reasons, it’s not recommended as a DIY project. As someone embedded in the business, you’ll need outsider eyes that can view challenges and opportunities from a fresh perspective.
However, always remember that YOU are the expert on your business and your customers. So while you’ll want to engage trusted advisors to help direct your journey, you still need to be the person leading it. As you consider possible collaborators to help shape your digital strategy, look for companies or individuals who will empower you to articulate your vision, harness the power of your data, and motivate your team.
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